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Screenshot of a breaking news alert e-mail from Q2 2017
The U.S. Commodity Futures Trading Commission (CFTC) today announced that Paul Greenwood of North Salem, New York, who operated a $1.3 billion investment scam where he and a co-Defendant misappropriated at least $554 million from commodity pool participants, was sentenced to 10 years in federal prison for charges related to his participation in the scam. Earlier, on July 28, 2010, Greenwood pled guilty to a six-count criminal indictment on the charges, including a commodities fraud charge in violation of the Commodity Exchange Act (CEA).
The criminal charges arose from Greenwood’s solicitation fraud and misappropriation of pool participant funds, as charged in a Complaint filed by the CFTC on February 25, 2009 and a companion Complaint filed by the Securities and Exchange Commission.
According to findings in Consent Orders entered earlier in the CFTC case, from at least 1996 to 2009, Mr. Greenwood and a co-Defendant solicited more than $7.6 billion from institutional investors, including charitable and university foundations and pension and retirement plans through Westridge Capital Management, WG Trading Investors, LP, and other entities.
The Defendants defrauded victims by falsely depicting that all pool participants’ funds would be employed in a single investment strategy that consisted of index arbitrage. However, pool participants’ funds were transferred to another entity from which Greenwood and the co-Defendant siphoned funds.
Of the approximately $554 million in pool participants’ funds misappropriated, over $130 million was used for Mr. Greenwood and the co-Defendant’s personal expenses, including purchasing rare books, horses, and Steiff teddy bears for as much as $80,000.
In a sentencing letter filed with the Court in the criminal proceeding, the U.S. Attorney’s Office for the Southern District of New York acknowledged that Greenwood had cooperated and had provided substantial assistance to the government and the court-appointed receiver in the CFTC and SEC cases. The receiver’s efforts to marshal assets to date have resulted in the recovery of over $900 million dollars, or close to 90 percent of investors’ claims.
Aitan Goelman, the CFTC’s Director of Enforcement, stated: “The sentence in this case should serve as a warning that those who willfully violate the CEA face the very real chance of a significant term of imprisonment. The CFTC will continue its vigilance in protecting commodities and derivatives investors from fraud and other forms of financial crime.”
The CFTC greatly appreciates the assistance of the National Futures Association, the office of the U.S. Attorney for the Southern District of New York, the Federal Bureau of Investigation, and the Securities and Exchange Commission.
For the full announcement from the CFTC, click here.